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QIAGEN (QGEN) Beats Earnings and Revenue Estimates in Q2

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QIAGEN N.V.'s (QGEN - Free Report) second-quarter 2018 adjusted earnings per share (EPS) came in at 33 cents, up 10% year over year. The figure beat the Zacks Consensus Estimate of 32 cents. At constant exchange rate or CER, the company reported adjusted earnings of 33 cents.

Revenues in Detail

Net sales at actual rates in the second quarter grew 8.1% on a year-over-year basis to $377.2 million (6% at CER). Also, the top line surpassed the Zacks Consensus Estimate of $376.9 million.

Region-wise, sales from the Americas (48% of revenues) grew 10% at CER, while revenues from Europe-Middle East-Africa (32%) increased 4%. Further, revenues from Asia-Pacific/Japan (20%) rose 1% year over year.

Segments in Detail

QIAGEN primarily generates revenues through Molecular Diagnostics, Applied Testing, Pharma and Academia, which represented 49%, 9%, 20% and 22% of net sales, respectively, during the reported quarter.

Molecular diagnostics sales were up 10% at CER. Sales derived from Applied Testing declined by 3% at CER. Pharma sales rose 4% at CER in the second quarter and Academia sales improved 4% on growing demand.

QIAGEN N.V. Price, Consensus and EPS Surprise


Operational Update

Adjusted operating income (excluding restructuring charges) increased 14.8% year over year to $101 million in the second quarter. However, adjusted operating margin expanded 160 basis points to 26.8%. 

Financial Update

QIAGEN exited the second quarter with cash and cash equivalents of $674.4 million, down from $814.9 million at the end of the first quarter of 2018. Net cash from operating activities in the first six months of 2018 was $166.2 million, up from $129.5 million in the year-ago period. Moreover, the company reported free cash flow of $123.4 million for the first six months compared with $91.6 million in the year-ago period.

QIAGEN announced a new commitment in January to return $200 million to shareholders via open-market repurchases, after returning $300 million to shareholders by the end of 2017. Notably, shares will be repurchased on the Frankfurt Stock Exchange. As of Jul 27, 2018, the company has bought back a total of 1.1 million shares on the Frankfurt Stock Exchange for EUR 35.0 million (approximately $40.7 million). 

2018 Guidance

QIAGEN has maintained its 2018 guidance for total net sales growth at about 6-7% at CER. This guidance considers a drop in U.S. HPV test sales to have an adverse impact of around 1.5% on total net sales growth in 2018. Further, sales of about $7 million during the second half of 2018 from the acquisition of STAT-Dx was taken into account. The Zacks Consensus Estimate for 2018 revenues is pegged at $1.54 billion.

Moreover, the adjusted EPS guidance has been reiterated at $1.31-$1.33 at CER. Our consensus estimate for 2018 earnings of $1.33 is at the high end of the guided range.

Further, currency movements are expected to have a positive impact on 2018 net sales growth of up to 1% and an adverse impact of about a penny per share on adjusted EPS.

The company also provided the financial guidance for the third quarter of 2018. Net sales are expected to grow around 6% at CER. Adjusted EPS is expected at 33-34 cents at CER on an underlying basis. The Zacks Consensus Estimate for earnings stands at 34 cents per share, coinciding with the high end of the company’s guided range. Our consensus estimate for revenues is pegged at $391.9 million.

Further, currency movements are expected to have a negative impact on third-quarter 2018 net sales growth of up to 2% and up to a penny on adjusted EPS.

Our Take

QIAGEN ended the second quarter on a solid note. We are impressed with the year-over-year growth in majority of the segments. The company also delivered a strong performance with respect to operating margin. Meanwhile, its commitment to return more to shareholders through increased repurchases reflects its solid cash position. Expectations of favorable currency movement in 2018 also buoy optimism.

We are also upbeat about QIAGEN’s recent partnership with SRL, Inc. Per the non-exclusive partnership agreement for clinical laboratory research services, QIAGEN´s companion diagnostic workflows will be implemented by SRL on approval of the drugs and tests by Japan’s Pharmaceutical and Medical Devices Agency. Several tests co-developed by QIAGEN with pharmaceutical partners are expected to enter registration in Japan in the future. Also, the company’s announcement that its careHPV Test has been added to the World Health Organization list of prequalified in vitro diagnostics encourages us.

On the flip side, a competitive landscape and strong reliance on collaborations remain major overhangs.

Zacks Rank & Key Picks

QIAGEN has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical sector which reported solid results this earnings season are Intuitive Surgical (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Align Technology, Inc. (ALGN - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported second-quarter 2018 adjusted EPS of $2.76, which beat the Zacks Consensus Estimate of $2.48. Revenues totaled $909.3 million, also surpassing the consensus estimate of $870 million.

Align Technology posted second-quarter 2018 adjusted EPS of $1.30, steering past the Zacks Consensus Estimate of $1.09. Revenues came in at $490.3 million, beating the consensus estimate of $462.9 million.

Chemed reported second-quarter 2018 adjusted EPS of $2.81, which trumped the Zacks Consensus Estimate of $2.68. Revenues of $441.8 million edged past the Zacks Consensus Estimate of $432.3 million.

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